With whiplash costs on the rise, despite safer driving conditions, Steve Caffrey questions the role of claims management firms in commoditising claimants.
Motor insurers are enduring a rocky ride at the moment. Numerous factors are increasing the pressure for rate rises, among them the rising costs associated with neck injury claims. But many policyholders are still struggling with the effects of recession, and everyone will feel the sting of this month’s VAT increase.
This is why increases in premiums are triggering regular bouts of outrage in the press, despite the fact insurers still pay out more than they bring in on their motor books. When premiums go up, insurers get the blame. Any justification for the increase is rarely given an airing in the popular media â but perhaps the insurance sector should draw some comfort from the fact parliament’s transport select committee is taking the subject seriously enough to conduct an enquiry into the cost of motor insurance.
The main uncomfortable truth is that insurers are generally considered to be greedy and even anti-policyholder in their perceived reluctance to pay claims. This is why so many people think of insurers as fair game, and are willing to exaggerate or even invent circumstances that will enable them to claim successfully.
To counter this situation, insurers must continue the battle to put the facts before the public and, indeed, the transport select committee. Insurers must also do what they can to reduce costs and thus minimise the rate rises they need to push through.
Underlying claims inflation
So, let us look in detail at neck injury claims. Evidence presented to the committee on 9 November 2010 revealed that bodily injury claims are increasing at a rate of 30% a year. Insurers believe this may result in a 15% to 20% increase in claims costs â and no-one believes they can easily secure an increase in premium income to match this.
The committee was told that much of the blame rests with claims management firms cashing in on minor accidents and, in 70% of cases, claiming damages for whiplash. MPs were also told that the number of claims management companies had doubled in recent years, with many receiving referral fees from solicitors. Such fees can equate to up to £1000 per case.
This increase in personal injury claims should be seen in the context of fewer accidents taking place on the UK’s roads. And if we are driving safer cars, that offer more protection against personal injury, why are more injuries are being reported?
Claims management firms argue that they are simply making people aware of their right to seek redress following an accident â and not just in cars; injuries in the workplace are also a favoured topic of advertisements dominating the daytime TV schedules. The reasoning is that, in the past, these people would not have made a claim, despite having grounds for one. Now they are fully equipped to seek recompense.
But the suspicion remains that claims are being manufactured purely to squeeze juice from insurers. For instance, it is well known that many supposed whiplash injuries are diagnosed by a medico-legal ‘expert’, sometimes during a cursory five-minute examination. This can mean there is often minimal consultation or conversation with the claimant.
Where this is the case, surely insurers are justified in questioning the quality of the evidence? And surely they also have the right to challenge the claimant’s level of incapacity? Inevitably, by so doing, the insurer will be cast in the role of avaricious ogre, ever eager to avoid paying claims. But this is another reason to put forward the argument that every fallacious claim that is paid increases the premium costs of other policyholders.
Claims management companies and claimants’ solicitors often trumpet that need to prioritise the interests of the client. But how is an injured person’s interest served by a cursory once-over that does not allow for a full and thorough discussion of symptoms, let alone the treatment options?
Surely an injured person should not be content with a brief examination and such minimal interaction? This hardly counts as expert medical opinion. It would be like cracking your tooth on a gobstopper and visiting the dentist just to have him glance inside your mouth and then tell you to sue the guy who runs the sweetshop.
Whiplash conveyor belt
It is entirely possible to imagine a scenario where a whiplash ‘specialist’ handles up to 30 claimants in a single day, producing 30 similar reports with almost identical content and prognoses. Just one day of whiplash injury medical examinations could, therefore, potentially rack up costs to insurers of close to £150 000.
This might be an extreme example â but the surge in whiplash claims is coming from somewhere. Someone is pushing them forward on a claims conveyor belt. And the real danger for insurers â as well as their motor policyholders â is that these claims effectively become a commodity, with little or no scrutiny, questioning or challenge as they pass through the system.
We in the insurance sector should take heart from the fact that Lord Justice Jackson, in his review of the legal system, said it is wrong for personal injury claimants to be treated as a commodity. He argues that referrals fees should be outlawed, although any such move would meet with massive resistance.
Regardless of what happens in terms of civil litigation reform, insurers should not apologise about protecting their own interests. We need an equitable and transparent framework within which insurers can maintain viable businesses and policyholders can rely on a fair deal and value for the money when it comes to paying premiums.
Steve Caffrey is head of technical claims at Groupama Insurances
Source: Claims Standards Council
